- Target
- ₹2,150
- At report
- ₹1,730+24% printed
- Vs our close
- +27.7%
JM Financial raises its target price on One 97 Communications (Paytm) to INR2,150 from INR1,950 after NPCI notified a 40bps UPI MDR on P2M transactions above INR2,000 from 15th Oct'26 -- materially above the broker's prior 25bps assumption but with broader merchant/category carve-outs than modelled. The broker cuts its eligible-GMV overlay to 20% (from 30%) while retaining a 20% Paytm share assumption (~8bps pass-through), lifting FY27E/FY28E adjusted EBITDA 9.8%/19.0% above no-MDR estimates and reiterating BUY on a valuation rollover to 40x Sep'28E EV/EBITDA.
- NPCI notified a 40bps MDR on P2M UPI transactions above INR2,000 (capped at flat INR300 for transactions ≥INR75,000), with concessional flat/capped rates for railways, telecom, insurance, fuel, utility and capital-market transactions, and remains well below credit card economics (1.5-2.5%)
- Transactions up to INR2,000 (>95% of P2M volume) and all P2P transfers remain at zero MDR; small P2PM merchants (up to INR1 lakh/month via UPI QR) are exempt regardless of ticket size
- NPCI has not specified how the MDR pool will be split across issuing bank, acquiring bank, payment app and NPCI; broker adopts a conservative 20% share for Paytm (~8bps pass-through) as its base case, versus media reports suggesting issuing banks could get ~40%
- Base case (8bps, 20% eligible GMV) implies incremental revenue of INR2.1bn/4.7bn and incremental adjusted EBITDA of INR1.4bn/4.4bn (net of UPI incentive loss) in FY27E/FY28E, lifting adjusted EBITDA margin by 110bps/270bps to 14.6%/20.6%
- Paytm's UPI market share in value terms has risen for a sixth straight quarter, from 5.57% in Q1FY26 to 6.96% in Jul'26
- TP raised to INR2,150 (from INR1,950, +10.3%) via a valuation rollover to 40x Sep'28E EV/EBITDA, reiterating BUY
- NPCI has not specified the MDR pool distribution across the value chain; the 20% share assumption (~8bps flow-through) is a major risk factor, with FY28E adjusted EBITDA uplift sensitivity ranging from 2.5% (10% eligible GMV, 3bps) to 52.1% (30% eligible GMV, 14bps)
- Narrower-than-expected eligible GMV base given wide-ranging exemptions for small merchants and concessional categories
- Competitive pressure on take-rates as UPI monetisation draws in new entrants
- Adverse allocation of the MDR pool away from the payment app segment
- Effective date of the new UPI MDR framework on 15th October 2026
- Further NPCI clarification on how the MDR pool will be distributed across issuing bank, acquiring bank, app and NPCI
- Continued gains in Paytm's UPI market share (up for six consecutive quarters)
| Broker estimates | Unit | FY25A | FY26A | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|---|
| Net Sales | ₹ mn | 69,005 | 84,370 | 1,06,746 | 1,34,732 | 1,63,030 |
| EBITDA | ₹ mn | -15,072 | 5,023 | 12,902 | 25,473 | 36,398 |
| EBITDA Margin | % | -21.8 | 6 | 12.1 | 18.9 | 22.3 |
| Adjusted Net Profit | ₹ mn | -14,869 | 7,379 | 13,957 | 24,903 | 32,623 |
| Diluted EPS | ₹ | -21.9 | 10.9 | 20.6 | 36.7 | 48 |
| ROE | % | -10.5 | 4.8 | 8.3 | 13.1 | 14.7 |
| P/E | x | — | 159.2 | 84.2 | 47.2 | 36 |
| P/B | x | 7.8 | 7.3 | 6.6 | 5.8 | 4.9 |
| EV/EBITDA | x | — | 186.1 | 71.4 | 35.1 | 23.7 |
Valuation: 40x Sep'28E EV/EBITDA (valuation roll-forward to Jun'28E). TP raised to INR2,150 (from INR1,950) valuing Paytm at 40x Sep'28E EV/EBITDA, reflecting the roll-forward and the incorporation of UPI MDR monetisation into estimates. FY27E/FY28E/FY29E consolidated revenue raised marginally (+0.1%/+0.2%/+0.2%), adjusted EBITDA raised 0.9%/1.1%/1.0%, and adjusted PAT raised 0.9%/1.0%/0.8% versus the broker's prior (12th August) estimates, reflecting the notified UPI MDR framework; TP raised 10.3% to INR2,150 from INR1,950.
Extraction note: This is a regulatory/estimate-update note (UPI MDR framework), not a quarterly earnings note, so 'quarter' is null. All financial figures are in INR mn as printed; the report's own comparison table (Exhibit 7) shows changes versus the broker's immediately prior (12-Aug-26) note, …